CANADA FX DEBT-C$ in modest retreat as oil gain offsets Syria worries

By Solarina Ho
TORONTO, Aug 28 (Reuters) - The Canadian dollar was
marginally weaker against the U.S. dollar on Wednesday but
outperformed its commodity-linked peers as higher oil prices
helped offset selling by investors seeking safer currency
options due to rising tensions in Syria.
Brent crude climbed to a six-month high and U.S. crude
peaked to its highest level since May 2011 as the likelihood
that Western countries would take military action against the
Syrian government rose.
Oil prices climbed on fears that Western intervention could
further destabilize the Middle East, one of the world's biggest
oil producers.
Canada is a major energy exporter and higher oil prices
often boost its currency.
"Yesterday ...the markets ended up paying a little bit more
attention to what we saw in terms of rising energy prices and
that seems to have halted the deterioration in the Canadian
dollar," said Mark Chandler, head of Canadian fixed income and
currency strategy at RBC Capital Markets.
"That's providing some offset to the broader risk-off move.
When people look at Canada, and they look at it from the
perspective of commodities, they have been - rightly so - paying
more attention to it in terms of the energy impact."
The Canadian dollar traded at C$1.0488 versus the
greenback, or 95.35 U.S. cents at 9:17 a.m. (1317 GMT). This was
marginally weaker than Tuesday's North American finish at
C$1.0474, or 95.47 U.S. cents.
The currency was expected to trade between C$1.485 and
C$1.0535 for the remainder of the session, according to RBC
Capital Markets.
The Canadian dollar did make gains against other major
currencies, including the commodity-linked Australian and New
Zealand dollars , as well as the euro
and yen.
Geopolitical worries are expected to dominate currency
moves, at least until Friday, when Canadian economic growth data
for the second quarter is released.
Canadian government bond prices fell across the maturity
curve. The two-year bond fell 3.9 Canadian cents,
yielding 1.185 percent, while the Benchmark 10-year bond
retreated 45 Canadian cents, yielding 2.619 percent.